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IT-Director.Com, September 12, 2002

Offshore development gains pace

By Jack Of Hearts

The market for offshore developments, dominated by India for the past few years, is gathering pace says Gartner in its latest assessment of development services. The company found that, whilst demand is currently low, the temptation of good value development work is proving hard to resist.

Gartner spoke to more than 900 firms, with 1,000 or more employees, about their development plans and discovered that 5% of them were either using, or planning to use, overseas development. That sounds a little low but still. Those that have used overseas outsourcing services sound very satisfied with the work. They're planning to increase their spending in this area. And of those that are doing this 69% plan to spend one and a half times as much this year, and 26% plan to double their budgets.

The projects that are getting outsourced overseas are the classic bread and butter development projects - enterprise application integration typically being the most popular. Application development and outsourcing are popular too. And the majority of the money is flooding directly into India.

Gartner found that India was the most popular choice by a long way, and it's outlook is getting better by the day. Of those that have used overseas outsourced services, 70% had used firms in India. 83% of those surveyed, who said they had or were planning to use overseas outsourcing services, said they plan to outsource to India in the next twelve months.

The Indian development companies have been making bullish inroads to the services landscape for a number of years now with moderate success. One thing that has marked them out from the crowd however, and the prime reason for their success, is the price. Whereas a company like IBM might charge a firm hundreds of thousands for a project, overseas development, with its ready access to a cut-price work force, may charge a fraction of that and give just as good, if not better, service.

Whilst it might be true that the offshore developers have not caused the earthquake that some had expected, they have certainly affected the earnings potential of the likes of Oracle, SAP, etc. But that's only to be expected. If you're the biggest software company in the world then, naturally, it's going to be a target. And, naturally, the customers are going to choose the cheaper option.

There are obviously some problems with outsourcing to the popular India. War is one of them, albeit seemingly diminishing, and culture being the ones most talked about today. Overcome those though and you can potentially save a fortune.

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